In one sentence: After Netflix, Phil and Danielle turn to the big-tech group (Meta, Apple, Amazon, Netflix, Alphabet, Microsoft), then Phil breaks Google's revenue into its parts to show why its search business is about as close to a monopoly as it gets, setting up the question of why the stock is down 30%.
Key ideas
- Why these stocks. After weeks on one company, the hosts want to go through specific, well-known names; everybody knows them, so they're fun to study. Danielle notes that even Netflix is no longer a conglomerate like the rest. [00:00–06:00]
- Interwoven businesses. Netflix chose Microsoft for ad services while running on Amazon's cloud. Android runs about three billion phones; AWS took a CIA deal from IBM, which first made Phil take Amazon's cloud seriously. [02:00–04:30]
- Apple not on sale. They've covered its ecosystem moat before; Phil doesn't see it as cheap, unlike Alphabet. [18:00–19:00]
- Alphabet price context. The stock peaked near 150 and was about 113, roughly 30% down. [19:00]
- YouTube is a black hole. About 10% of revenue, viewer figures undisclosed, free to users; Phil calls it the challenger to paid streaming. [19:00–21:30]
- Revenue breakdown (Phil's rough figures). Ads about 65%: Search about 40–45%, ads on other sites about 11–12%, YouTube about 10%. Cloud about 9% (roughly $6B against Amazon's $20B, growing and unprofitable), Google Play about 15% (growing fast, high margins), hardware about 9%. [21:30–28:00]
- Targeting. Cookies and predictive categorisation let advertisers pay per click for ads matched to you; the Target pregnancy story shows how predictive it is. [22:00–25:30]
- Monopoly in search. Free for users, effective and cheap for advertisers, and hard to break up. Phil bought Google early, then sold it, a mistake he says he makes (selling winners). [22:00–28:30]
- Next step is the event. Why is it down 30%? Left for the next episode. [28:30–29:00]
- Tangents. A long digression on Sanskrit and renaming the acronym is skippable. [05:00–18:00]
How it maps to RuleOne
- Revenue-by-segment breakdowns like this come from the 10-K and are the sort of thing to look at before judging a moat on a stock page.
- A 30% drawdown on a big name is what the event watch flags; the work is finding the fear.
Buffett, Munger and Graham links
- Buffett has said he missed Google despite seeing how well advertisers' clicks worked (remarks at Berkshire meetings; check the source before quoting).
- Selling winners too early is a mistake Buffett and Munger often describe; Munger's Poor Charlie's Almanack talks about sitting on your hands.
Words to know
- FAANGM: Meta (Facebook), Amazon, Apple, Netflix, Alphabet (Google), Microsoft.
- Segment revenue: a company's sales split by business line.
- Cloud: renting computing and storage over the internet.
Try this
Open Alphabet on /stock/TICKER/ (GOOGL) and find its latest 10-K segment note. Write down each segment's share of revenue and compare it with Phil's rough figures.
Check yourself
- About how much of Alphabet's revenue comes from advertising?
Answer
Roughly two-thirds, in Phil's figures (search, ads on other sites, and YouTube). - Why does Phil call YouTube a black hole?
Answer
Alphabet doesn't disclose viewing numbers, so investors can only estimate its value. - What mistake does Phil say he repeats with Google?
Answer
Selling a big winner that then keeps rising.
Short quotes
"This company in its search world is as close to monopoly as exists anywhere." (Phil, ~28:00, auto-transcribed)